Midas - Earnings poised for a strong rebound into FY14F
and FY15F; maintain BUY, TP raised to S$0.64.
We expect firm earnings rebound for Midas in FY14F as highspeed
railway (HSR) contracts roll in. Midas won its first HSR
contract (Rmb168m) in over two years in October, as China
resumed its HSR development programme, with more likely
to come. We believe the Group could win a substantial order
arising from the recent second rolling stock tender for 314
train sets, or about 2,500 train carriages. Over the next two
years, we believe a further 700 over train sets could be
tendered for, resulting in further wins for Midas in the HSR
segment. At the same time, we expect (PRC) metro orders to
continue flowing in, and overseas orders, which have grown
substantially in 2013, to continue to be robust as Midas looks
to maintain a more diversified earnings base. Maintain BUY,
with our 12-month TP raised to S$0.64 (Prev S$0.60), based
on 1.2x FY14F P/BV. We believe current valuations are
attractive for a stock whose earnings are poised for a strong
rebound into FY14F and FY15F.
Standard & Poor's Ratings Services (S&P) has cut Thai
Beverage’s credit rating to below investment grade to reflect
the weaker combined profile of its corporate group. S&P
downgraded ThaiBev's long-term corporate rating by a notch
to BB+ from BBB-, two weeks after placing the company on
CreditWatch negative. In response to the negative watch,
ThaiBev has said it will no longer pay to be rated by S&P.
Moody's expects stable outlook for S-Reits in 2014, with
Moody's 13 rated S-Reits expected to grow by 4%, fuelled by
a larger asset base and rent increases on existing properties.
Overall occupancy and rental rates are expected to remain
stable, but the warehousing segment - where Mapletree
Logistics Trust and Cache Logistics have the largest exposure -
will have potential weakness from a spike in the supply of
new warehouse space, said the rating agency. That being
said, however, it is estimated that about 40% of this space
has been pre-committed by end-users, so this may mitigate
the impact of the enlarged supply.
US Indices Last Close Pts Chg % Chg
Dow Jones 16,025.5 5.3 0.0
S&P 1,808.4 3.3 0.2
NASDAQ 4,068.8 6.2 0.2
Regional Indices
ST Index 3,113.6 (0.5) (0.0)
ST Small Cap 531.1 1.5 0.3
Hang Seng 23,811.2 68.1 0.3
HSCEI 11,432.9 56.8 0.5
HSCCI 4,664.2 18.0 0.4
KLCI 1,841.9 14.9 0.8
SET 1,367.4 5.9 0.4
JCI 4,214.3 33.6 0.8
PCOMP 6,008.9 (6.0) (0.1)
KOSPI 2,000.4 20.0 1.0
TWSE 8,444.6 76.9 0.9
Nikkei 15,650.2 350.3 2.3
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 574
Total Daily Vol (m shrs) 2,761
12m ST Index High 3,454
12m ST Index Low 3,004
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
9 Dec
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.645 0.82
ComfortDelgro Buy 1.925 2.19
OCBC Buy 10.040 12.40
Singapore Airlines Buy 10.230 11.40
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
9 Dec
Target Price
($)
Ezion Holdings Buy 2.250 3.30
China Merchants Buy 0.915 1.20
CSE Global Buy 1.020 1.11
Nam Cheong Buy 0.290 0.42
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
Office landlords are expected to have greater pricing power
next year, on the back of a limited supply of new office space
in the core central business district (CBD) - where
CapitaCommercial Trust and Keppel Reit derive the bulk of
their income - and nothing in the pipeline for 2015. On the
retail front - where CapitaMall Trust and Frasers Centrepoint
Trust have the greatest exposure - there is a glut of space in
the suburban areas. But occupancy and rental rates are
expected to remain stable because the supply is spread across
the island, and because suburban malls are resilient through
economic cycles as providers of non-discretionary items to
homes in nearby estates. In the business and science park
space, where Ascendas Reit has the largest exposure, the
strong take-up of upcoming space will keep occupancy and
rental rates broadly stable next year, said Moody's.
Raffles Education is in a deal to sell the land use rights and
property in China's Hebei province to through a 70:30 jointventure
firm and a put option agreement. Raffles Education
has an irrevocable put option to sell its 70% share in the JV to
its partner at an exercise price of RMB700m. Based on this
price, the excess of the net proceeds of the put option over
the land and property's book value is about $27.4m. The
company intends to utilise the proceeds for reinvestment in
the core education businesses of the group.
Lum Chang has entered into an agreement to acquire the
freehold property located at 52 to 57 Price’s Square, London
for £26m plus tax of about £5.2m. The property extends to
about 30,099 sq ft within six inter-communicating buildings
and is currently operating as a hotel.
The executive condominium (EC) scheme has been tweaked to
bring the terms for ECs closer to that for public housing and to
support a stable and sustainable EC market. The Ministry of
National Development said that there will be three changes.
The first change involves the Mortgage Servicing Ratio (MSR)
for EC housing loans from financial institutions for units
bought directly from developers. The MSR, imposed by the
Monetary Authority of Singapore (MAS), will be capped at
30% of gross monthly income and will apply to purchases
where the option-to-purchase is granted today and hereafter.
Previously, the MSR did not apply to ECs. The second change
is that second-timer applicants who buy EC units directly from
developers must now pay a resale levy, just like second-timer
applicants who buy Build-To-Order (BTO) flats. The third and
final change is the reduction in the cancellation fee for EC
buyers from 20% of the purchase price to 5%, in line with the
practice for BTO flats.
The employment outlook in Singapore is tipped to stay
favourable in the first three months of next year, says the
Manpower employment group. 19% said they expect to
recruit staff; 3% said they would trim staff. This yields a net
employment outlook of 16%. Another 67% said they will be
in a holding pattern in staffing levels.
China's annual consumer inflation unexpectedly slowed in
November, easing market fears of any imminent policy
tightening as authorities meet this week to outline their policy
and reform priorities for 2014. Annual consumer inflation
unexpectedly slowed to 3% in November from an eightmonth
high of 3.2%. The market had expected the inflation
rate to hold steady at October's level. From a month earlier,
consumer prices fell 0.1%, the first fall in six months and a
touch weaker than market expectations that they would be
flat.
China’s producer prices fell 1.4% y-o-y in November - the 21st
consecutive month of decline - against a fall of 1.5% in the
previous month. On a monthly basis, producer prices were
unchanged. A strong jump in exports and a run of surveys of
factory and service sector activity indicate that the world's
second-largest economy has regained some momentum since
arresting a protracted slowdown in the middle of the year.
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